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Maybe we will get lucky this time around. The first oil correction rebounded sharply from the -10% level and it appeared we were going to be left at the station. Our patience was rewarded and we are right back testing those lows again around $53. I was targeting the $50 area for the current contract as an entry level in the past but with September (CL05U) showing strong support in the $54 range, currently $55.45, I am no longer hoping for a dip all the way to $50.

Secondly the oil stocks are not dropping. We were hit on our Unocal trigger last week and got Chevron by default. Those are the only two oils that showed any material decline. Therefore, I am putting in breakout triggers on all the oil stocks on the watch list. I do not want to be sitting here empty handed if oil suddenly decides it is done correcting once again. Just like $58 can be seen as a double top it would be easy for traders to decide $53 is a double bottom.

If we do get a big drop in oil and we start to get some entries triggered I want to avoid buying them all. After TWO energy stocks are triggered I want you to lower all the entry points $2 on everything else. If TWO more are triggered then lower the entry points $2 once again. Stop all entries at six energy positions.

I added the DJX puts, albeit a week late as my potential entry target of 10550 was hit a week early. Hopefully it will come back to us.

Dropped Entries

New Watch List Entries
Dow Jones - Index Puts

Current Watch List

DJX - Dow Jones
COP - Conoco Phillips
OXY - Occidental Petroleum
XOM - Exxon Mobil
XLE - Energy SPDR
VLO - Valero Energy
PCO - Premcor


COP - $109.10 Conoco Phillips

** Breakdown Target $96.00 **
** Breakout Target $113.00 **

Conoco is my first choice for an oil stock once the current trend eases. I would like to get an entry around the 100-day average now at $96 but rising. This has been a good support level in the past.

Breakdown entry: BUY 2007 $100 LEAP Call OJP-AT
Breakout entry: BUY 2007 $115 LEAP Call OJP-AD


OXY - $72.21 Occidental Petroleum

** Breakdown Target $65.00 **
** Breakout Target $76.00 **

OXY would be my next choice with the same 100-day average as an entry point. That is currently $63 but I don't see the potential for a drop much under $65.

Breakdown target: BUY 2007 $70 LEAP Call VXY-AN
Breakout target: BUY 2007 $80 LEAP Call VXY-AP


XOM - $60.01 Exxon Mobil

** Breakdown Target $55.00 **
** Breakout Target $63.50 **

XOM has larger reserves and more cash than any other oil company. They have to find something to do with their $28 billion and it will either be returned to the shareholders or used to buy more reserves.

Breakdown target: BUY 2007 $60 LEAP Call ODU-AL
Breakout target: BUY 2007 $65 LEAP Call ODU-AM


XLE - $42.74 Energy SPDR

** Breakdown Target $38.00 **
** Breakout Target $44.50 **

The XLE covers all the bases and the options are cheap. We will not get the same move in the XLE as an individual stock but it is much more steady.

Breakdown target: BUY 2007 $40 LEAP Call ORJ-AN
Breakout target: BUY 2007 $45 LEAP Call OJW-AS


PCO - $62.74 Premcor

** Breakdown Target $56.00 **
** Breakout Target $66.00 **

Premcor is an independent refiner with higher margins and upside potential from diversification.

Breakdown target: BUY 2007 $60 LEAP Call VJE-AL
Breakout target: BUY 2007 $65 LEAP Call VJE-AM


VLO - $77.20 Valero Energy

** Breakdown Target $68.00 **
** Breakout Target $82.50 **

Valero is an independent refiner that has made the switch to the higher profit margins of sour crude.

Breakdown target: BUY 2007 $75 LEAP Call VHB-AO
Breakout target: BUY 2007 $85 LEAP Call VHB-AQ


DJX - $104.61 Dow Index

** Upside target 105.50 **

I almost posted this last week but postponed the entry thinking we would have plenty of time. Unfortunately the markets rebounded and hit my target before I was ready. Hopefully we will see another earnings bounce to resistance once again.

BUY 2007 $104 LEAP Puts YDK-XZ

Leaps Trader Watch List Archives